As the earnings season heats up, analysts are turning bullish on Ujjivan Small Finance Bank shares. Currently, the stock is trading around ₹35, hovering near its 52-week low. Despite the pressure on the microfinance sector, analysts believe that the business will start improving by FY26. The stress in the microfinance portfolio is expected to ease from Q4 onwards, with a potential 70% upside in the stock price.
Analyst Outlook on Ujjivan Small Finance Bank
Centrum Broking has maintained a BUY rating on Ujjivan Small Finance Bank and increased its target price from ₹58 to ₹59. With the stock currently trading around ₹35, this represents a potential 70% upside.
- In December 2023, the stock hit a 52-week high of ₹63, which is also its all-time high.
- On January 13, 2025, it touched a 52-week low of ₹32.
- Historically, the stock has never delivered positive returns in February and March.
Ujjivan Small Finance Bank Q3 Results
While Q3 results showed some weakness, there are signs of improvement ahead.
- Net Profit: Fell by 64% YoY to ₹109 crore.
- Net Interest Income (NII): Rose by 3.1% to ₹887 crore.
- Operating Profit: Dropped from ₹457 crore to ₹359 crore.
- Earnings Per Share (EPS): Declined from ₹1.53 to ₹0.56.
- Gross NPA: Increased to 2.68% (from 2.52% in Q2 and 2.18% a year ago).
- Net NPA: Steady at 0.56% (compared to 0.17% a year ago).
- Return on Assets (ROA): Dropped to 0.25% (from 0.55% in Q2 and 0.78% a year ago).
Expectations for Q4 and Beyond
Management is optimistic about improved performance starting from Q4.
- Credit Cost: Increased to 2.93% YoY (FY25 expected range: 2.3–2.5%).
- Loan Growth: Expected to be around 9% for FY25.
- Deposit Growth: Also projected to stay in the 9% range.
- JLG and IL Disbursements: Anticipated to pick up in Q4.
- FY26 Guidance: Will be issued in the first quarter of the fiscal year.
Should You Buy Ujjivan Small Finance Bank Shares?
✅ Positive Factors:
✔️ Potential 70% upside.
✔️ Expected improvement in microfinance business by FY26.
✔️ Bullish outlook from major brokerage firms.
⚠️ Risk Factors:
❌ Weak Q3 performance.
❌ Rising Gross NPA levels.
❌ Historically poor performance in February and March.
Conclusion
If you’re a long-term investor willing to take some risks, Ujjivan Small Finance Bank could be a good opportunity. However, short-term volatility is likely, so it’s important to monitor entry points and consider using stop-loss strategies
